There are many credit cards today. Some focusing on cashback and some on free travel or other travel benefits. Some cards will grant you access into thousands of worldwide lounges, and others will give you top Hilton Diamond Status. There are cards with no annual fees and some with fees over $500 a year. Overall, I rank credit cards into 5 tiers.
Tier 5: Building Credit
Tier 5 includes student cards and secured credit cards. Secured cards do not have a sign up bonus and will likely not have any rewards. With secured credit cards, you have to put down a deposit on the card, which then becomes your credit limit. After months of paying your card on time, the card will help your credit score and you will be able to get your deposit back. Secured cards don’t come with any benefits and the only purpose of having one is to build your credit. Student credit cards are geared towards students with a low credit score. Oftentimes, a co-signer may be required for a student with no credit history. Student cards usually have minimal benefits and a small sign up bonus, but nothing amazing. Once again, the main purpose is to build credit. Some of the top secured credit cards include the Capital One Secured Mastercard and the Citi Secured Mastercard. Some of the best student credit cards include the Chase Freedom Student and the Discover It Student Card, which offer rewards on purchases and keeping the account in good standing. I would not recommend signing up for a card in this tier unless you are a student or someone without a credit history with the goal of building one.
Tier 4: Start Cards
Tier 4 credit cards tend to be the type of credit cards that you can get after you have credit but still in the beginning process of growing credit. In other words, this type of card is what a student should apply for as their first card after a student credit card. Just because I deem them as starter cards, doesn’t mean that they are not good for more developed players in the game of credit cards. These cards have no annual fee and are cash-back based for the most part. There is normally a small sign up bonus and simple spend categories. This would include 1.5% back on everything with the Chase Freedom Unlimited, or rotating quarterly 5% categories with the Discover It card. These cards are very straightforward and great for beginners because their bonus rewards normally apply to all purchases. I use this tier of cards for my spending that does not fall into bonus categories with my higher tier cards. Some other examples of this type of card include the Capital One Savor One Card and the Citi Double Cash Card, which are two of my favorites.
Tier 3: Mid-Tier Cards
Tier 3 credit cards tend to include the beginner travel credit cards. These cards have a relatively low annual fee, anywhere from $99-$250 a year. Most of the time, they come with other great benefits as well, such as a free night credit with the Marriot Bonvoy Boundless credit card or the $100 CLEAR credit with the AMEX Green Card. Most of the time, the benefit of just keeping the card open and paying the annual fee to get the free night certificate is worth it. Sometimes, people refer to many tier 3 cards as keeper cards or sock drawer cards for this reason. Tier 3 cards require a more extensive credit history to get approved than most tier 4 cards. These cards are some of the best cards for people who may only travel once or twice a year. Most have high rewards back in certain spend categories. Tier 3 cards should make up the majority of cards in your wallet if you want to maximize travel rewards. Some other examples of a tier 3 card are the Capital One Savor Card and Chase Sapphire Preferred.
Tier 2: Top Travel Cards
Tier 2 cards are the best credit cards that most people can get. They have high annual fees and high rewards. The cards have amazing rewards such as top tier hotel status with the AMEX Hilton Aspire Card or high statement credits on travel. Priority Pass cards often come for free with tier 2 cards, which allow its members to access thousands of worldwide airport lounges with free food, showers, drinks and even spas. Although they have high annual fees, the benefits pay down that cost. The American Express Platinum Card, an amazing high end reward card, comes with a $550 annual fee, but that cost is brought down by the $200 yearly Uber credit and the $200 airline fee credit. In addition, they have high bonus categories such as 5x points on flights with that same AMEX Platinum card. Most people should probably only have one or two of these top cards, but for some having many or none of these cards could be beneficial. Other cards in this category include the Chase Sapphire Reserve and the United Club Card.
Tier 1: Invite Only
Tier 1 cards are unfortunately something that not many people can achieve. In this category two cards come to mind; the JP Morgan Palladium Card and the American Express Centurion Card. You cannot apply for these cards online like the ones listed above. The only way to get either is to put high spend on your other credit cards with the bank and to be completely honest, just be rich. These cards normally require having a high net worth, possibly 10 Million plus, or have high spending requirements on the lower level cards of that brand. For these cards your credit score doesn’t matter nearly as much as how much you are worth, and most people can only aspire to having one. The rewards and annual fees of tier 1 cards are not straightforward, as they are not officially published by the companies that make them. For rewards that could be included, the AMEX Centurion Card is a good example. Its benefits include an expensive Equinox gym membership, Delta Diamond status, and even their concierge, which is essentially a personal assistant willing to help you with anything you could need. After the great benefits comes the not-so-great annual fee that is $5,000, with a $10,000 initiation fee. On the other hand, the JP Morgan Palladium Card does not have such a high annual fee and with it, less significant rewards. Many people aspire to these cards, but they are out of reach for most.
Not all cards are created equal, but using the benefits of different cards from different tiers you can maximize every dollar you spend. My rule of thumb is to make sure that I am getting at least 2% back on all purchases. Although you may not be able to get a tier 1 card, you can still have amazing benefits that make you feel like you are number one.
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